Energy 3 April, 2020 10:00 am   
COMMENTS: Filip Grzegorczyk

Grzegorczyk: Tauron’s business continuity is safe, the grid works normally (INTERVIEW)

“The Tauron Group supports the government and the society in the fight against the coronavirus. Our corporation is socially responsible,” says Filip Grzegorczyk, CEO of the Tauron Group in an interview with “We have taken all the necessary measures to protect our employees. Key positions in our production facilities are staffed,” the CEO ensures. What steps has the Tauron Group taken in the face of the coronavirus epidemic?

Filip Grzegorczyk, CEO of the Tauron Group: Our actions can be split into a number of categories. First, we are protecting our own employees. Second, we are protecting our clients and third we are ensuring business continuity. Finally, the fourth element is corporate social responsibility.

When it comes to protecting our employees we have taken all the necessary measures. We are making sure that the key positions in our production facilities are staffed. We monitor the employees’ temperature and provide hand sanitizer. We have limited our activities in the distribution sector. We have also decided to limit the number of previously planned works to handling failures only. The distributors who monitor the grid are dispersed, so that a healthy team is always available.

Corresponding solutions have been applied at our production facilities. The staff in all units has been dispersed. Thanks to that, in case of an infection we will be able to prevent shutdowns. Business continuity is ensured and the grid works normally. We have enough fuel in our storage to last for three months. When it comes to client services, the stationary centers are closed. We are also supporting parents and schools. Our youtube channel has lessons where we explain in an accessible and attractive way how electricity is generated and how to handle power safely and, e.g. how to generate a lightning in a lab.

Last year Tauron’s wind farms produced about 700 GWh of power. This is a 60% increase in comparison to the previous year. How big is the participation of renewables in the Group’s total power production?

Tauron is consistent in implementing its strategy whose goal is a green transformation, which means we want to gradually replace coal with renewable energy sources (RES).

In 2019 we produced 1.4 TWh from RES. Tauron’s wind farms provided 700 GWh of power, which was 60% more than in the previous year and is enough to provide power to 300 thousand households. This increase was possible thanks to the fact that we purchased wind farms that almost doubled our generation capacity of wind power.

Tauron is already investing in RES, but you want to expand that portfolio. The Green Hub project by the Polish Development Fund is supposed to help with this. What are these investments about?

Tauron signed an agreement with the Polish Development Fund (PFR). We are cooperating with regard to investments in RES. As part of this project we are co-financing the development of onshore wind and photovoltaic farms. According to the initial agreement, further investments will be eligible to receive funds from the PFR, each to the tune of at least PLN 50 m. PFR will inject capital in investments depending on their needs. Tauron’s participation will be at least 50% plus one share.

We are satisfied with our cooperation with PFR. We are currently changing the subject of this cooperation. We are heading towards RES. We do need a partner, as few companies can afford to make their own purchases. Investing in RES is the Tauron Group’s future.

Despite its green transformation, Tauron still does and will continue to rely on coal for power generation. Your flagship investment is the coal-fired plant in Jaworzno. However, during its launch the new installation experienced a malfunction. When will the new unit start to produce energy and commence commercial energy supply?

The Jaworzno 910 coal-fired power plant project needs some explanation. This is the last coal investment in the Tauron Group. We will not be pursuing projects of this kind anymore. However, we should bear in mind this is one of the most modern installations of this kind in Europe. Its CO2 emissions are a lot smaller per supercritical parameters. In case of NOX and SOX pollutants the emission is lower by over 90% and in case of CO2 it’s lower by 30% in comparison to a 200 MW installation.

We should also remember that this project was initiated so long ago that its discontinuation would make no sense. It was at such a late stage of development, that stopping the construction would be very difficult, which is why we decided to continue, despite the costs.

Perhaps due to the current megatrends and the EU climate and energy policy, the construction of the unit in Jaworzno may raise eyebrows, but these doubts should have been addressed when the decision to start the project had been made.

The unit has also acquired a 15-year contract on the capacity market. We believe the decision to continue the project was right. Today we are facing problems that cropped up when the plant was being put into service. We should also bear in mind that the Tauron Group is not building this unit, we only commissioned it. All of Tauron’s responsibilities, including auxiliary installations, the track system and preparing everything around the unit were fulfilled on time. It is true that the general contractor has not completed the installation yet. Today we are facing the consequences of the malfunction. Currently, the only deadline we can announce is July 2020. However, we can only rely on the information provided to us by the contractor.

Tauron has applied for a license to build offshore wind farms. You have also submitted your comments to the offshore act. What kind of support system do you propose?

Our strategy is to increase the participation of RES. This pertains mostly to onshore wind and photovoltaic farms. We treat offshore wind farms as promising projects and we are seriously considering such investments.

If you’re asking about the support system for offshore farms, we do have a few points that we’d like to make. However, we should not create a situation where a state-owned company enjoys privileges in the support system for offshore wind farms. The auction model for offshore wind farms allows both private and state-owned companies to participate. Tauron wants to be a leader on this market, but the scale of our involvement will be determined by the availability of technology and the subsidy model for these investments.

Tauron is looking for buyers who could purchase the company’s heating assets. At what stage are the talks with potential shareholders?

One of the market requirements is to sell our heating assets. This pertains to the shares in the Tauron Ciepło company. However, this is not a simple process. It is hard to expect for such enormous transactions to be conducted quickly. The sales procedure has launched. First offers have arrived and we are considering them. We cannot divulge who the potential clients are. However, I can say that the offers we received show that there is interest and that the offers themselves are interesting. Currently we are conducting the due diligence process.

A dedicated platform has been launched where potential investors can review the relevant documents. However, the process can take longer because of the pandemic. I would also like to remind everybody why we want to sell the heating assets. On the one hand, we have to remember that this is a regulated sector with stable revenue, but on the other it requires more investments.

Since our investment capabilities are limited, we have to use our capital to finance projects with higher return.

We do not want to invest in transitional technologies, such as natural gas. We want to face the climate requirements and we believe gas technologies are risky in view of the EU climate policy. What is happening to coal today, may happen to gas in a few years. I am not saying this will take place, but the risk may appear. Suggestions made by the European Investment Bank actually do imply that gas may share coal’s fate. We want to transition to RES directly and steer clear of gas technologies. We have to keep our heads cool and verify whether a given offer is profitable for us. Once the offers are on the table, we will make our decision. We are researching the market to sell these assets in the best way possible.

Does this mean Tauron is considering selling its shares in the gas-fired CHP plant project in Stalowa Wola?

The plant in Stalowa Wola is a joint investment with PGNiG. This is a different asset to the assets that belong to Tauron Ciepło. The decision to construct it, similarly to Jaworzno, was made a few years ago. The only thing we could do is finish the investment in very difficult circumstances created by the general contractor. Still, I do hope that this unit will be  launched in the next few weeks, or the next quarter at the latest. This will be a modern unit with a contract on the capacity market. It will be a valuable asset that we should keep.

Interview by Bartłomiej Sawicki